Customers willing to unshackle gold holdings may be in for a 2-3% interest rate annually on their precious metal deposits once the Budget proposals to tap unutilised household stocks of 20,000-22,000 tonne gather steam, said industry executives.
An SBI research report says the scheme could monetise gold worth at least R1,00,000 crore. At their meetings with the RBI and government officials, industry had sought a decent interest rate — that too in gram of gold — and lowering of the minimum limit on such deposits to 40-50 gram. They argued that the extant gold deposit scheme had failed because it mandated a minimum gold deposit of 500 gram, which effectively left out 98% Indians, and offered a mere 1% interest (denominated in gold) on such deposits.
Rajesh Khosla, MMTC-PAMP managing director, said the government had agreed to set up a working group, involving all stateholders, to work out modalities for such a scheme. Khosla said if customers get 3% interest, the bank can give gold loans to jewellers at 6%, factoring in handling and refining charges of 1.5%. Currently, established jewellers get gold loans at 3.5-4.5%, though many smaller players get them at 5.5-6% or even higher.
The model for the scheme suggested by industry works like this: A customer with a bank account will apply for an add-on account, which would be designated in gram of gold. The banks must be linked to purification-testing centres and upon arrival, the customer will be explained that the gold he would like to deposit will be melted. Once he agrees, the gold will be melted to ascertain the purity and quantity, and then will be credited to his metal account. The rate will depend on the period of investment. A bank-designated refiner will then convert it into a bar. When demand from jewellers drops in off-season, banks can pledge more gold and less cash with RBI against their SLR requirements or CRR and, consequently, can use the cash to lend at attractive interest rates.